2010 Retail Outlook Review Series – Part 1

This series will outline retail trends, innovation and best practices for retailers in 2010. Look for Part 2 next week.

As 2010 gets underway, retailers are prepared for sales to trickle back. 2009 forced retailers to make some necessary changes. The general pattern for the year was slashing inventories, getting back to the basics and battling for the lowest prices. The following are results and projections from the National Retail Federation for 2009 and 2010.

2009 – a hard hit for retail

2009 was an extremely difficult year for retailers. Industry retail sales (excluding autos, gasoline and restaurants) declined by 3.3% in the first quarter, 3.4% in the second and 3.8% in the third quarter compared to the previous year. Fourth quarter sales rose a slight 0.3%. Despite overall sales slump, lower inventories enhanced retailers’ profit margins. The National Retail Federation forecast that holiday sales (November and December combined) would be down 1.0%, but instead, preliminary results showed a gain of 1.1%.

2010 – projected sales to increase by 2.5%

In 2010, the retail environment will remain difficult, but the improved economy and easy comparisons will result in positive sales gains. NRF forecasts that retail sales will increase by 2.5% vs. the 2.5% decline in 2009.

Interestingly, some retailers were able to thrive in 2009 and take advantage of a very difficult time in retail by having the ability to proactively understand in real time what was happening to their business. These thought leading retailers adjusted their business strategies to meet the local needs of their shoppers and better leverage their inventory investments.

This year, these same retailers have the best possible understanding of what to expect during the spring and fall shopping surges and are formulating their plans to leverage this knowledge to grow their business. It’s about bending to the customer and giving them what they want at prices they are willing to pay.

Technology helps retailers adjust to the “New Normal”

While retail has stabilized somewhat, all indications predict that customer buying habits have forever shifted. Consumers are still clipping coupons and getting into the habit of buying products, fashions, and food that has the most value and is long-lasting. With these new consumer patterns, forecasts of past shopper behavior are no longer relevant. In a recent interview with Barron’s, Deborah Weinswig, Citigroup Investment Research’s retailing analyst said “retailer’s must adjust to the New Normal, conspicuous consumption is definitely out.” Weinswig, who focuses on major retailers such as Wal-Mart Stores, Home Depot and Target, states that “technology stories are key,” when she considers investing in retailers.

“Retailers who are investing in optimizing their environment to localize their decisions about the customer are the only real winners,” states Weinswig. One of these retailers Deborah is enamored with is Kohl’s. She states that they have “completely pulled away from the pack.” She continues, “Kohl’s has done such a great job in terms of delivering value to the customer at the right price that Target has lost share to them on apparel and home goods.” Kohl’s remains progressive and has continued to grow through the recession, while most retailers saw a negative trend in their comps.

Why is technology so important?

Weinswig states, it is “because retailers have been so late to the game. That’s the underlying story at Saks. They have invested a lot in technology. So has J.C. Penney, which has spent a lot of time on cycle-time reduction. And there’s Home Depot, which is upgrading its technology. That’s the common thread in terms of the retailers we have Buys on. Consistent with this theme, Nordstrom did a major technology implementation in 2004 and now they have some of the best inventory turns in my coverage universe.”

One area where retailers have really seen results through the recession is by utilizing intelligent inventory planning and management technology that can help retailers decrease excess inventory to align demand with store need. To do that, retailers need to look for solutions that can give them real-time visibility to their chain, their product performance and customer buying habits at each store.

When they have this kind of visibility and can utilize this intelligence in their merchandise planning, forecasting, ordering, allocation and replenishment processes, they can manage each store effectively, rather than aggregating and averaging their data. When you combine automation that turns store data into profitability monitoring and strategic merchandise management, this creates instant ROI for retailers.

Get back in the game

Are you ready this year to know exactly what your customers are asking for at every location and to have the ability to react as their wants change? If you are looking for a solution that can drive momentum for your business this year, check out the solutions offered by Quantum Retail. Our customers see valuable results in 8 to 12 weeks, and our implementation approach gives your team access to the system from the beginning, so you can manage changes to your processes with ease. Quantum Retail continues to help all of its clients drive positive business value more rapidly than anything seen in retail.

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